IMF Approves $1 Billion Loan to Pakistan Amid Economic Reform Efforts

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Posted by newadmin on 2025-05-12 08:43:09 |

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The International Monetary Fund (IMF) has approved a $1 billion loan to Pakistan under its Extended Fund Facility (EFF), offering critical support to the nation amid persistent economic struggles. This approval comes as Pakistan continues to face severe balance of payments issues, driven by long-standing structural weaknesses such as low infrastructure investment, high inflation, and poor fiscal management.

The EFF is designed to help countries facing medium-term economic challenges. It provides financial aid with longer repayment periods, enabling governments to implement necessary reforms. In Pakistan’s case, these reforms have included efforts to stabilise inflation, enhance tax collection, and reduce reliance on excessive borrowing. Notably, inflation dropped to 0.3% in April 2025, marking a significant policy success.

Pakistan's economy has been on a downward trajectory for years, with its GDP shrinking and inflation previously reaching 29.1% in 2023. Despite some progress, the country still depends heavily on external financial support. The IMF’s latest loan was approved after assessing improvements in foreign exchange reserves and new fiscal policies like the Agricultural Income Tax.

While the loan offers short-term relief, concerns remain about its use. India has raised objections, citing fears of potential misuse for military spending. The true test for Pakistan will be whether it can implement deep structural reforms and move toward long-term economic sustainability without recurring reliance on foreign aid.

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